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Stock-Based Compensation | 9 Months Ended
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Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Stock-Based Compensation | Note 6—Stock-Based Compensation Long Term Incentive Plan On October 7, 2016, the stockholders of the Company approved the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan (the “LTIP”). An aggregate of 16,500,000 shares of Class A Common Stock were authorized for issuance under the LTIP, and as of September 30, 2017, the Company had 11,199,857 shares of Class A Common Stock available for future grants. The LTIP provides for grants of stock options (including incentive stock options and nonqualified stock options), stock appreciation rights, restricted stock, dividend equivalents, restricted stock units and other stock or cash based awards. Stock-based compensation expense is recognized within General and administrative expenses and Exploration expense on the consolidated statements of operations as shown below. Historical amounts may not be representative of future amounts as the value of future awards may vary from historical amounts. Upon adoption of ASU 2016-09 in October 2016, the Company elected to account for forfeitures of awards granted under these plans as they occur in determining compensation expense.
(in thousands) | For the Three Months Ended September 30, 2017 |  | For the Nine Months Ended September 30, 2017
Restricted stock awards | $ | 1,490 |  |  | $ | 3,364 |
Stock option awards | 2,104 |  |  | 5,825 |
Performance stock units | 231 |  |  | 231 |
Total stock-based compensation expense | $ | 3,825 |  |  | $ | 9,420 |
Restricted Stock The following table provides information about restricted stock awards outstanding during the nine months ended September 30, 2017:
| Awards |  | Weighted Average Grant-Date Fair Value
Outstanding as of December 31, 2016 | 256,597 |  |  | $ | 20.03 |
Vested | — |  |  | $ | — |
Granted | 841,443 |  |  | $ | 17.21 |
Forfeited | (8,788 | ) |  | $ | 18.81 |
Outstanding as of September 30, 2017 | 1,089,252 |  |  | $ | 17.86 |
The Company grants service-based restricted stock awards to executive officers and employees, which generally vest ratably over a three-year service period, and to directors, which generally vest over a one-year service period. Compensation cost for the service-based restricted stock awards is based upon the grant-date market value of the award. Such costs are recognized ratably over the applicable vesting period. Unrecognized compensation cost related to unvested restricted shares at September 30, 2017 was $15.7 million, which the Company expects to recognize over a weighted average period of 2.5 years. Stock Options Stock options that have been granted under the LTIP expire ten years from the grant date and have service-based vesting schedules of three years. The exercise price for an option under the LTIP is the closing price of the Company’s Class A Common Stock as reported by NASDAQ on the date of grant. Compensation cost related to stock options is based on the grant-date fair value of the award, recognized ratably over the applicable vesting period. The Company estimates the fair value using the Black-Scholes option-pricing model. Expected volatilities are based on the re-levered asset volatility implied by a set of comparable companies. Expected term is based on the simplified method, and is estimated as the average of the weighted average vesting term and the time to expiration as of the grant date. The Company uses U.S. Treasury bond rates in effect at the grant date for its risk-free interest rates. The following table summarizes the assumptions and related information used to determine the grant-date fair value of stock options awarded during the nine months ended September 30, 2017:
| Nine Months Ended September 30, 2017
Weighted average grant-date fair value per share | $ | 7.15 |
Expected term (in years) | 6 |
Expected stock volatility | 38.1 | %
Dividend yield | — | %
Risk-free interest rate | 2.0 | %
The following table provides information about stock option awards outstanding during the nine months ended September 30, 2017:
| Options |  | Weighted Average Exercise Price |  | Weighted Average Remaining Term (in years) |  | Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2016 | 2,735,500 |  |  | $ | 14.67 |  |  |  |  |
Exercised | — |  |  | $ | — |  |  |  |  |
Granted | 1,550,000 |  |  | $ | 17.96 |  |  |  |  |
Forfeited | (268,000 | ) |  | $ | 14.53 |  |  |  |  |
Outstanding as of September 30, 2017 | 4,017,500 |  |  | $ | 15.95 |  |  | 9.2 |  |  | $ | 8,450 |
Exercisable as of September 30, 2017 | — |  |  | $ | — |  |  | — |  |  | $ | — |
As of September 30, 2017, there was $18.9 million of unrecognized compensation cost related to unvested stock options, which the Company expects to recognize on a pro rata basis over a weighted average period of 2.2 years. Performance Stock Units The Company grants to executive officers performance stock units that are subject to market-based vesting criteria as well as a three-year service period. Vesting at the end of the three-year service period is subject to the condition that our stock price increases by a greater percentage, or decreases by a lesser percentage, than the average percentage increase or decrease, respectively, of the stock prices of a peer group of companies. The market-based conditions must be met in order for the stock awards to vest, and it is, therefore, possible that no shares could vest. However, the Company recognizes compensation expense for the performance stock units subject to market conditions regardless of whether it becomes probable that these conditions will be achieved or not and compensation expense is not reversed if vesting does not actually occur. The grant-date fair value was estimated using a Monte Carlo valuation model. The Monte Carlo valuation model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Expected volatility was calculated based on the historical volatility of our common stock, and the risk-free interest rate is based on U.S. Treasury yield curve rates with maturities consistent with the three-year vesting period. The following table summarizes the key assumptions and related information used to determine the grant-date fair value of performance stock units awarded during the nine months ended September 30, 2017:
|  | Nine Months Ended September 30, 2017
Number of simulations |  | 1,000,000 |
Expected stock volatility |  | 41.6 | %
Dividend yield |  | — | %
Risk-free interest rate |  | 1.5 | %
The following table provides information about performance stock units outstanding during the nine months ended September 30, 2017:
| Awards |  | Weighted Average Grant-Date Fair Value
Outstanding as of December 31, 2016 | — |  |  | $ | — |
Vested | — |  |  | $ | — |
Granted | 193,391 |  |  | $ | 21.53 |
Forfeited | — |  |  | $ | — |
Outstanding as of September 30, 2017 | 193,391 |  |  | $ | 21.53 |
As of September 30, 2017, there was $3.9 million of unrecognized compensation cost related to unvested performance stock units, which the Company expects to recognize on a pro rata basis over a weighted average period of 2.75 years.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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